So the topic of choice for this week is the current buzz about the recent M&A deal between Hewlett Packard and 3Comm - two very large IT infrastructure corporations. After announcing a $2.7 billion deal for Hewlett's acquisition of 3Com, there has been a suspect and unexpected jump in behind-the-scenes options trading regarding the two firms, as the options contracts on 3Com jumped just hours before the deal was made public.
As such, there is a large SEC (Securities and Exchange Commission) investigation into the matter, and rightfully so. Many corporate officers', boardmembers', and priveleged stockholders' portfolios flourished throughout the 1980's and 1990's amid the slurry of insider trading scandals, which drew a large amount of attention to Wall Street and from then on has given it a tainted reputation. To the majority of the American people, as well as foreign investors, insider trading is just another reason not to trust in the ability of large corporations to "protect" their interests and have become the subject of many otherwise accepting, naysayers.
Recently, however, after several years of relative tranquility, the need for easy cash has arisen once again, and Wall Street (along with many other international trading institutions), has been plagued by scandal. A little over a month ago, the Galleon Group hedge fund scandal arose, shedding light on Mr. Rajaratnam's insider trading scheme that has trumped all prior incidents. From the S.E.C's point of view, this is a call to arm the troops and to get ready to buckle down for a long, drawn out war against corporate greed, especially as the down economy threatens investors' senses of security and their ability to milk legitimate profits from otherwise legal and moral sources.
As the share price of 3Com's stock rose over 5% on the day the deal was announced and the November call options skyrocketed to over SEVENTEEN TIMES the 4-week average, one must look at this situation with some dismay: Are we really reverting back to this? Is America going to repeat the atrocities that the government has sought to rectify for years? Can the world continue with this barrage of immoral action? The answer is that no one knows. One can only trust in the governing bodies which have sworn to uphold legal trade and believe in their ability to keep America's head above the waters of recession, unemployment, and corruption as they continue to rise.
http://dealbook.blogs.nytimes.com/2009/11/18/3coms-dealmaker-of-the-week/
http://dealbook.blogs.nytimes.com/2009/11/16/sec-is-said-to-examine-3com-options-trading/
Gabriel Suprise
Group 2
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1 comment:
I remember the takeover wars of the nineteen eighties. This was a period of great upheaval in corporate america. The management of big companies was entrenched.
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